Daddy's Dog

Elena McMahan asked to meet with the Voice in Brighton Beach, in the Brooklyn penthouse apartment that she considers a refuge. Her husband, D. Bruce McMahan, was out of the country, and she said it was the best time to meet and discuss the things that had made him the talk of Wall Street last fall: In September, villagevoice.com published "Daddy's Girl," the story of how McMahan, while legally married to Elena, carried on an incestuous relationship with his grown daughter, Linda, that culminated in a bizarre 2004 wedding ceremony in London's Westminster Abbey.

For the first time, Elena is talking about her own side of the story, even though it may have serious legal repercussions in her current battle with McMahan over the custody of their children.

Through 2004, Elena had grown increasingly suspicious of the relationship between her husband and his daughter, and found in McMahan's computer the evidence of that relationship: eye-opening e-mails between the two of them, and photographs from the Westminster Abbey nuptials.

Elena put that evidence into a court affidavit in January 2005, when McMahan attempted to divorce her. The millionaire in turn tried to convince Linda to produce her own affidavit denying the affair, but she refused. McMahan then launched a legal war that resulted in five lawsuits in five U.S. states.

Documents in those lawsuits spelled out the extraordinary facts in the sordid matter: McMahan, now 68, only learned of his daughter Linda's existence in 1990, when she was a 21-year-old college student. She had been put up for adoption by a woman that McMahan had a brief fling with in the late 1960s, and she had contacted him when she wanted to learn the identities of her biological parents. After a paternity test established their biological tie, McMahan welcomed Linda into his family and funded her college and post-graduate endeavors.

McMahan already had six other children by three different women (he has nine children today). He was a wealthy money manager, maintaining homes in Pelham in Westchester County and on Fisher Island, a wealthy enclave off of Miami. It was at the Pelham house that Linda claims her father first began seducing her, in 1998. She testified that they had sex for the first time in a hotel in London that year on a business trip, and that they carried on an incestuous relationship practically up to the day she married another man, Sargent Schutt, in 1999. After breaking off their affair for a few years, Linda testified that it started up again when McMahan brought her to Fisher Island to recuperate after an illness.

Linda claimed that McMahan then intensified the relationship and even tried to woo her away from Schutt, her legal husband. Their e-mails, included in court records, document the salacious way the father-daughter couple spoke about having sex, and how they called each other "h" and "w" for "husband" and "wife."

Most gruesomely, Schutt discovered a vibrator in Linda's luggage after one of her trips to Fisher Island, and had it analyzed for DNA.

The sex toy tested positive for Linda's skin cells, as well as the sperm cells of her biological father.

McMahan not only denied the allegations in the lawsuits, but he also, not surprisingly, did what he could to prevent the publication of "Daddy's Girl." He also tried to convince the judges to seal the lawsuits, but he was initially rebuffed.

Shortly before publication of the story, McMahan forked over between $5 million and $8 million to settle all five suits and then convinced four of the judges to seal them forever (one judge, in Connecticut, refused, and the documents in that federal case are still free for the public to view). Repeated attempts were made to reach McMahan. Marcia Horowitz, a publicist employed by McMahan, responded to an inquiry with: "You can say Mr. McMahan declined to comment."

By the time "Daddy's Girl" was being prepared for publication, Elena had reconciled with McMahan and wasn't talking about her role in the drama. But reporters who cover the hedge-fund market told us the story was the talk of Wall Street, where McMahan was a well-known player. Since then, the word had gotten back to us that some of McMahan's investors were pulling out of his fund, that McMahan was hardly showing up at Fisher Island anymore, and that he was spending more and more time in a place where few, if any, knew about the details of "Daddy's Girl": the Persian Gulf super-rich enclave of Dubai.

It was Elena who tipped us to that fact. A few weeks ago, she contacted us for the first time, wanting to talk about her husband, his strange, incestuous obsession, and his plans to leave the country.

And she wanted to give us a tour of his Pelham estate, where he first seduced his daughter.

Elena McMahan is disarmingly soft-spoken, keeping her head lowered as she begins a conversation barely above a whisper. The Ukrainian woman wears the head scarf that identifies her as a member of the Orthodox Church, and when she speaks to her children, Vladimir, 5, and Elizabeth, 3, the three of them converse just audibly in Russian. Elena is slender and has striking blue-green eyes, but mostly keeps them lowered. Vladimir and Elizabeth are unusually well-behaved and contemplative.

It was a sunny and windy day in May, with the Brighton Beach penthouse apartment's large windows overlooking the beach at Upper New York Bay. If the location was scenic, the interior was pastoral: Wallpaper borders featured forest scenes and bunny rabbits. Toys, meanwhile, were scattered everywhere. Elena uses the place as an escape for herself and her two young children now that her relationship with McMahan has soured.

McMahan met Elena Larionova in 2000, while he was on a family vacation aboard a European cruise ship. He was with his fourth wife, Cynthia, and the son from his third marriage, Joshua. Elena was working in one of the ocean liner's bars, and she says McMahan instantly took a liking to her, complimenting her specifically about her work ethic.

When the cruise was over, McMahan gave Elena his business card and told her to call on him for anything at all. A few months later, Elena's mother needed surgery for circulatory problems (something Elena herself has inherited). She decided to contact McMahan.

The wealthy financier helped arrange for an operation, and sent money for Elena to purchase a computer so that she could correspond with him via e-mail.

Elena says the still-married McMahan was soon writing her every day. He was also calling her from time zones around the globe. Before long, he asked if he could visit her in Odessa. After a second visit and hundreds more e-mailed love notes, McMahan proposed.

"He was asking my mom on his knees," she says.

But first, he had to get through the divorce with Cynthia, a legal fight that lasted for more than a year.

During that time, however, Elena became pregnant. She came to London to live, unable to continue on to New York because, she says, the U.S. denies visas to unmarried Ukrainian women. After a difficult pregnancy, Elena gave birth to Vladimir, and then she waited for McMahan's divorce to become final.

Bruce and Elena were married on July 27, 2002, at the Pelham estate, two weeks after she arrived in New York. Vladimir was a year old.

Despite the hurdles they had to overcome to get married, Elena says that whatever romance had existed ended with their vows.

"The day we got home, he lost interest in me," she says. "I became his dog. He said, 'If you don't keep your mouth shut, I will take Vladimir.' Then I got pregnant with Elizabeth."

By early 2004, the couple had become increasingly estranged; McMahan, meanwhile, was spending a lot of time with his grown daughter, Linda. She had inherited Reiter's Disease from her father, a genetic malady that affects the soft tissues, eyes, and heart. He brought Linda to Fisher Island to recover from a bad bout of the disease at the Argent Center, the resort he had built there. McMahan and Elena resided in unit

7925, and Linda stayed at

7413, but Elena says that before long, McMahan openly relocated to Linda's condo.

"He moved in with herhis daughter," Elena says. "Everybody there knew."

According to Linda's testimony, it was the most intense time of a years-long illicit relationship with her father. Beyond simply having sex, she claimed that her father wanted to keep her away from Schutt, her legal husband in Mississippi, and wanted to formalize their affair. In June 2004, after purchasing Cartier wedding rings, Bruce and Linda flew to London and had some kind of ceremony performed inside Westminster Abbey, took photos outside like any other newly married couple, and then began referring to each other as husband and wife in their e-mails. (The marriage wasn't legal, but Elena says McMahan continues to wear his ring.)

Linda, in court testimony, claimed that Elena had hacked into her Yahoo e-mail account to find proof of the affair, but Elena says her stepdaughter got that wrong. She says McMahan had left his computer on, and she happened upon the evidence. (As part of the court settlements, Linda signed a confidentiality agreement; she has not spoken to the Voice for this or the previous story.)

"I just clicked the button," Elena says. "His e-mail was open. That was horrible. I was working on his computer. He left it on, and it was right there on the screen.

"I knew something wasn't right when he came back from London that time," she continues. "He loves to take pictures and show them around when he gets back, and this time he didn't show any pictures."

McMahan filed to divorce Elena, and she fought back by including the photos and e-mails with an affidavit swearing to her knowledge of her husband's incestuous affair (the affidavit is sealed now, but referred to in other court documents). But after Linda also defied McMahan, refusing to produce an affidavit of her own denying the affair, Elena relented when McMahan asked her to swear under oath that she was mistaken about her accusations.

She says now that she only signed the second statement because McMahan told her it was the only way he would continue to help her get her green card, for which he was her sponsor. Without a green card, Elena could have been sent back to the Ukraine, but she likely could not have taken their children because they are U.S. citizens.

"I protected him to an extent. He was making face like he's a good family man."

Today, however, she says that her second sworn statement is untrue, and she stands by her original affidavit. She has no doubt that Linda is telling the truth about the incestuous relationship between father and daughter.

After Elena signed her statement denying the incest, however, McMahan dropped his divorce action, and the couple reconciledat least long enough so that Elena agreed with his request not to speak with us when we called asking about her affidavit.

When "Daddy's Girl" went to print, and during the weeks of settlement discussions as McMahan attempted to have the various lawsuits sealed, Elena says he asked her to go to the Ukraine. She suspects that it was probably to keep her from being questioned about the story, or from being subpoenaed during the settlement talks.

Their reconciliation was short-lived. Since news about McMahan and the lawsuits broke last fall, their relationship has deteriorated, McMahan has refiled for divorce, and Elena now says she's a prisoner in McMahan's big house. She is receiving a "monthly maintenance" payment$49,000as their divorce progresses.

Driving toward Pelham in her light blue Lexus SUV, Elena points out the gilded, framed saints on her dashNicholas, Peter, and Paul.

"They protect me from the troubles. He's in a war, and he's using his own kids. In their claims, it's always about the money. I said to him many times, he has no hearthe has a dollar. He said there's nothing for him to do with business in America after the story came out. In Dubai, people do not care, but in America and in Europe, they don't want to do business with him anymore."

She's an unusually cautious driver, stopping for yellow lights that others would hit the gas to blow through, signaling carefully for the simplest lane change. After an hour's drive, she pulls slowly into the half-moon driveway at the two-story, Tudor-style brick house. She parks near the older Bentley sedan in front of the home's big wooden door. Elena is afraid that the five German shepherds have gotten loose, and she asks a house worker to put them in the basement.

Vladimir hops onto a bicycle. Elizabeth asks for a cookie.

The dark wooden paneling in the foyer makes it seem even darker than it actually is, but there's an orange glow coming from a stained-glass window. Through glass doors, you get a glimpse of the sweeping grounds that make up the four-acre estate, which include elaborate gardens, a pond with ducks, and a playground for the children.

On a table in the entryway, there are photos of McMahan alone and with his daughter Heather. A humidor holds a plentiful supply of hand-rolled cigars.

In a room off to the right of the foyer, two grand pianos can be seen through double doors. On the other side is a sunroom with a large swing and a sideboard with a photo of Linda. It's also where Elena keeps her dried and silk flowers for arrangements, and a few peacock feathers. She and her children live in a few rooms that seem obviously to have been intended by the home's builders as accommodations for the live-in staff. She points out that for all of the home's luxury, she's actually denied access to its main wing, which is up a grand staircase and behind a locked door.

"I am here like a guest. I cannot move; I cannot touch anything. If the kids break something, he makes me pay for it."

Because McMahan keeps his wife locked out of the home's main wing, she can't show us the study and bedroom where, Linda testified, he seduced her by showing her the first half-hour of the movie Braveheart and wondering if the two of them had been married in past lives.

Restricted to her wing of the house, Elena has installed a playroom for the children in what used to be a breakfast nook overlooking the estate grounds. It contains a television and a mountain of children's moviesin English and Russian. She keeps to her side of the mansion, and she and McMahan rarely talk.

"The day he settled everything with Linda, he began to treat me like dirt again," she says.

After a custody hearing last month in the Supreme Court of the State of New York in Westchester County, Elena says she became concerned that she and her lawyer were no match for McMahan's legal team. Since then, she has hired a new lawyer who she says is more aggressive, and who intends to subpoena Linda. Even though a judge appointed a guardian for the two small children, Elena says her greatest fear is that her husband's wealth will buy him custody of Vladimir and Elizabeth.

Telling her story now, she hopes, will convince McMahan to stop waging war with her in family court. She wants sole custody of the two children, and she wants his visits with them to be supervised.

"I am not fighting him because of the money," she says. "Nothing could be worse for me than to lose these kids. I cannot imagine for them to be with him alone."

Because of what happened with Linda, she says she can't help but be concerned about her own daughter.

It isn't the first time, she says, that she has worried about losing control of her children. During their 2004 divorce action, Elena says McMahan showed up hand in hand with his daughter Linda. "He wanted me to be deported to the Ukraine. . . . She was with him. He wanted to take my kids and raise them with Linda."

Elena says it was her affidavit which forced McMahan to give up that plan. "Only those pictures saved me."

Today, McMahan alleges in court documents that he fears Elena will run with the children to the Ukraine (a short two-hour flight from Dubai), and he won a court order that requires Elena to stay within 90 miles of New York City. He also refuses to allow her to move to the Brighton Beach penthouse in Little Russia, where she says she feels safer.

And now, she says, McMahan is planning to leave the country altogether, after the publication of "Daddy's Girl" embarrassed him from Wall Street to Fisher Island.

Former McMahan Securities executive Michael Shillan, who recently won an arbitration case against McMahan for back pay, says Elena is right about McMahan's business suffering after his affair with Linda became public.

"I don't know if anyone really understands all of his businesses," Shillan says. "I have a pretty good sense of what he is worth. When I left, he had about a 200 to 250 million net worth." But Shillan believes that the hedge fund McMahan manages has shrunk from about $4 billion to half that, in part because of the story and also because at about the same time, the convertible securities market took a hit. Also in September, the hedge fund called Amaranth Advisors LLC dropped to $3 billion from $9 billion in one week because of its heavy investment in natural gas futures.

"Let's face it, after your story came outand it was reprinted in quite a few placesthat's really not the kind of guy you want managing your money," he says.

"My personal experience is, once you get on Bruce's bad side, he tends to never forgive and forget, even when he's wrong," adds Shillan, who was once close to McMahan.

But Elena believes there is one person that McMahan could forgiveLinda. She mentions the photograph of Linda that her father keeps in a gold frame at the Pelham estate.